Analysis: Finding Property Tax Cuts That Taxpayers Feel

Analysis: Finding Property Tax Cuts That Taxpayers Feel

The problem with trying to lower property taxes at the state level is that the taxpayers — voters — often do not see the benefits.

Go ahead and bet that somebody in Texas is going to get property tax relief next year, not that voters will notice.

The promises are in the air, even now that the primary elections and the runoffs are over. Dan Patrick, the Republican candidate for lieutenant governor, advertised before the May runoffs that he would “cut property taxes for all Texans and eliminate all property tax increases for seniors.” He has kept the issue alive, repeating the pledge on his Twitter feed.

He might be able to deliver should he beat Democrat Leticia Van de Putte and others in November. Even if he somehow loses, some kind of property tax cut probably stands a good chance, given the attractiveness of the idea and the fact that liberals and independents also complain about property taxes.

Texas does not levy a property tax — local governments do — so state lawmakers cannot change the rates paid.

The formula is simple: The value of a property multiplied by the tax rate equals the amount of tax owed. Local officials look at the total value of property and set a rate that yields the revenue they need. State efforts to limit the growth of property tax revenues have met with limited success; local officials dislike mandates from Austin as much as they hate decrees from Washington.

The state, however, can have some say in what kinds of property can be exempted from the tax base. Farms get a break. So do homeowners over 65. And state law allows local governments to do what Patrick is promising, by freezing residential property tax bills at the amounts paid by homeowners as of their 65th birthdays.

Lawmakers can draw a line right there.

Older homeowners can also sign deferrals, agreeing to a freeze, reduction or elimination of their property taxes in return for liens that allow the collection of taxes from their estates after they die. The heirs might not like it, but such deferrals are available to people who are struggling to pay their bills and do not want to lose their homes.

If lawmakers wanted to, they could simply delete properties owned and occupied by anyone over a certain age, say 65, and counties, cities, school districts and other government bodies would have find their property tax revenue elsewhere.

Short of that, the state could freeze appraisals or tax bills, cutting local governments out of some growth in property values. The exemption for older homeowners would be relatively easy to broaden to other types of owners or to deepen, so that the current beneficiaries get an even better deal.

But there would be a price: To keep revenue from dropping, local governments would have to raise the taxes paid by everyone who did not get a new exemption. A 68-year-old homeowner might get a break, but a 40-year-old next door would have to pay higher taxes to make up for it. (One interesting political benefit would be that older voters are more likely to show up at the polls than middle-aged and younger ones — a benefit to politicians handing out this kind of candy.)

You can see a bit of potential payback going on. The state has tried a couple of times to lower local property taxes, increasing what the state pays for public education in the hope that local school districts would lower the property taxes that cover the local part of those expenses. A 2006 version was billed as a multibillion-dollar tax break.

Between increases in property taxes by other governments — the schools are not alone here — and rapidly increasing property values, it is hard to find taxpayers who can remember all the money they saved. That is another troublesome feature of property taxes: Cuts, if they happen at all, are not delivered as refunds, but as lower bills. For many, the entire transaction is buried in escrow in monthly mortgage payments. The homeowners — call them voters, for clarity — never get a slip of paper or a stack of money.